B-20689, OCTOBER 13, 1941, 21 COMP. GEN. 316

B-20689: Oct 13, 1941

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AS FOLLOWS: THE OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY HAVE REQUESTED US TO INCLUDE A CLAUSE IN OUR INVITATION FOR THE SALE OF SCRAP MATERIAL TO THE EFFECT THAT BIDS IN EXCESS OF CEILING PRICES ESTABLISHED BY THEM WILL BE REJECTED. WE HAVE ADVISED THEM THAT WE WOULD BE VERY GLAD TO COOPERATE WITH THEM. COULD ONLY DO SO IF WE HAD ASSURANCE FROM THE GENERAL ACCOUNTING OFFICE THAT THE CERTIFYING OFFICERS MAKING SUCH AWARDS WOULD NOT BE HELD RESPONSIBLE FOR THE LOSS TO THE GOVERNMENT OF THE DIFFERENCE BETWEEN THE HIGH BID AND THE CEILING PRICE AT WHICH IT WAS LET. PENDING THE RECEIPT OF SUCH ASSURANCE OR THE WORKING OUT OF A PLAN THAT WILL PERMIT THE ACCEPTANCE OF THE SUGGESTION OF THE PRICE ADMINISTRATOR.

B-20689, OCTOBER 13, 1941, 21 COMP. GEN. 316

SALES - SURPLUS PROPERTY - EFFECT OF GOVERNMENT PRICE-FIXING ORDERS; CASH BID SOLICITATION REQUIREMENT FEDERAL PRISON INDUSTRIES, INC., MAY NOT, IN THE SALE OF SCRAP MATERIAL, INSERT IN THE INVITATION FOR BIDS A PROVISION THAT BIDS IN EXCESS OF THE CEILING PRICE ESTABLISHED BY THE OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY FOR SUCH SCRAP MATERIAL WOULD BE REJECTED. FEDERAL PRISON INDUSTRIES, INC., MAY NOT OFFER TO EXCHANGE SCRAP STEEL FOR NEW WITHOUT SOLICITING, ALSO, CASH BIDS FOR THE SCRAP MATERIAL.

COMPTROLLER GENERAL WARREN TO THE ATTORNEY GENERAL, OCTOBER 13, 1941:

THERE HAS BEEN RECEIVED FROM THE SECRETARY, FEDERAL PRISON INDUSTRIES, INC., A LETTER OF SEPTEMBER 22, 1941, AS FOLLOWS:

THE OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY HAVE REQUESTED US TO INCLUDE A CLAUSE IN OUR INVITATION FOR THE SALE OF SCRAP MATERIAL TO THE EFFECT THAT BIDS IN EXCESS OF CEILING PRICES ESTABLISHED BY THEM WILL BE REJECTED, AND THE AWARD MADE TO A BIDDER NOT IN EXCESS OF SUCH CEILING.

WE HAVE ADVISED THEM THAT WE WOULD BE VERY GLAD TO COOPERATE WITH THEM, BUT COULD ONLY DO SO IF WE HAD ASSURANCE FROM THE GENERAL ACCOUNTING OFFICE THAT THE CERTIFYING OFFICERS MAKING SUCH AWARDS WOULD NOT BE HELD RESPONSIBLE FOR THE LOSS TO THE GOVERNMENT OF THE DIFFERENCE BETWEEN THE HIGH BID AND THE CEILING PRICE AT WHICH IT WAS LET. PENDING THE RECEIPT OF SUCH ASSURANCE OR THE WORKING OUT OF A PLAN THAT WILL PERMIT THE ACCEPTANCE OF THE SUGGESTION OF THE PRICE ADMINISTRATOR, WE PROPOSE TO INCLUDE IN FUTURE INVITATIONS FOR ISSUE FOR THE PURCHASE OF STEEL AN ADDITIONAL ITEM THAT WILL INDICATE THE AMOUNT OF SCRAP STEEL THAT THE BIDDER WILL ACCEPT AGAINST THE SALE OF THE NEW STEEL, AND AT WHAT PRICE SUCH SCRAP WILL BE ACCEPTED. IF YOU HAVE NO OBJECTION TO INCLUDING SUCH PROVISION IN OUR FUTURE INVITATIONS, WE WILL ARRANGE TO INCLUDE IT.

TO CLEARLY ILLUSTRATE WHAT WE HAVE IN MIND, A CLAUSE SIMILAR TO THE FOLLOWING WOULD BE INSERTED IN THE INVITATION TO BID FOR QUANTITIES OF STEEL:

AGAINST OUR OFFER TO SELL THE ABOVE ITEMS, WE OFFER TO ACCEPT ------ - POUNDS OF (BALED) (UNBALED) SCRAP OF SIMILAR STEEL AT $------ PER TON.

WE WOULD APPRECIATE YOUR PROMPT REPLY.

IN THE ABSENCE OF A STATUTE PROVIDING OTHERWISE, THE PRINCIPLE HAS BEEN ANNOUNCED FREQUENTLY BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT, OVER A LONG PERIOD OF YEARS, AND HAS BEEN APPLIED CONSISTENTLY BY THE EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS, THAT IN THE DISPOSITION BY OUTRIGHT SALE-- - AS DISTINGUISHED FROM AN EXCHANGE--- OF OLD SUPPLIES, MATERIALS, ETC., THE INTEREST OF THE GOVERNMENT REQUIRES THAT COMPETITIVE BIDS BE OBTAINED AND THAT THE HIGHEST BID MEETING THE ESSENTIAL REQUIREMENTS OF PROPER SPECIFICATIONS BE ACCEPTED. SEE 26 COMP. DEC. 534; 3 COMP. GEN. 304; 5 ID. 798; 7 ID. 230; ID. 685; 15 ID. 811; ID. 1030; 18 ID. 227; AND 19 ID. 313. IN EVIDENT RECOGNITION OF SUCH PRINCIPLE THE ABOVE-QUOTED LETTER CONTAINS AN EXPRESSION OF DOUBT THAT FEDERAL PRISON INDUSTRIES, INC., IS AUTHORIZED, IN THE SALE OF SCRAP MATERIAL, TO REJECT THE HIGHEST BIDS RECEIVED, WHEN IN EXCESS OF CEILING PRICES ESTABLISHED BY THE OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY, AND AWARD CONTRACTS FOR THE SALE OF THE MATERIAL ON THE BASIS OF LOWER BIDS RECEIVED NOT IN EXCESS OF SUCH CEILING PRICES.

THIS OFFICE HAD OCCASION TO CONSIDER CERTAIN PRICE-FIXING ORDERS ISSUED BY THE OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY IN THEIR RELATION TO GOVERNMENT CONTRACTS IN A DECISION OF MAY 1, 1941, B 15941 (20 COMP. GEN. 703), TO THE SECRETARY OF THE NAVY, WHEREIN IT WAS HELD THAT THERE WAS NO AUTHORITY TO RELIEVE A SUCCESSFUL BIDDER OF ITS OBLIGATION TO PURCHASE SCRAP METALS BECAUSE THE BID PRICE WAS IN EXCESS OF THE CEILING PRICE ESTABLISHED AFTER ACCEPTANCE OF THE BID BUT PRIOR TO PERFORMANCE OF THE CONTRACT. IN REACHING SUCH CONCLUSION THERE WERE CITED, AMONG OTHER THINGS, THE FAMILIAR AND WELL-ESTABLISHED PRINCIPLES THAT THE UNITED STATES AS A CONTRACTOR IS NOT LIABLE FOR ITS ACTS AS A SOVEREIGN, AND THAT THE SOVEREIGN IS NOT AFFECTED BY STATUTORY PROVISIONS OR ADMINISTRATIVE ORDERS UNLESS EXPRESSLY NAMED THEREIN OR INCLUDED BY NECESSARY IMPLICATION. WHILE THE QUESTION NOW PRESENTED WAS NOT DIRECTLY DECIDED IN SAID DECISION THE PRINCIPLES SET FORTH IN THAT DECISION, AND THE REASONING THERE APPLIED, WOULD APPEAR TO BE CONTROLLING HERE. ACCORDINGLY, AND SINCE THERE APPEARS NOTHING IN THE STATUTES RELATING TO FEDERAL PRISON INDUSTRIES, INC., WHICH REASONABLY COULD BE CONSTRUED AS AUTHORIZING THE REJECTION OF THE HIGHEST CASH BIDS UNDER THE CIRCUMSTANCES PRESENTED, I WOULD NOT FEEL JUSTIFIED IN DEPARTING FROM THE WELL-ESTABLISHED PRINCIPLES ANNOUNCED BY MY PREDECESSORS AND AUTHORIZE THE INCLUSION IN INVITATIONS FOR THE SALE OF SCRAP MATERIALS BY FEDERAL PRISON INDUSTRIES, INC., OF A PROVISION THAT BIDS IN EXCESS OF ESTABLISHED CEILING PRICES WOULD BE REJECTED AND THE AWARD MADE ON THE BASIS OF A BID NOT IN EXCESS OF SUCH CEILING PRICES.

WITH RESPECT TO THE SUGGESTED "EXCHANGE" PROVISION WHICH IT IS PROPOSED TO INCLUDE IN FUTURE INVITATIONS FOR THE PURCHASE OF SCRAP STEEL THIS OFFICE SEES NO OBJECTION TO SUCH PROVISION SO LONG AS CASH BIDS FOR THE SCRAP STEEL ALSO ARE SOLICITED. IT IS UNDERSTOOD, HOWEVER, THAT WHAT IS PROPOSED IS THAT CASH BIDS WILL NOT BE SOLICITED BUT THAT BIDS ON AN EXCHANGE BASIS, ONLY, WILL BE CONSIDERED, THE PURPOSE BEING, PRESUMABLY, TO MORE OR LESS RESTRICT THE BIDDING TO STEEL MANUFACTURERS AND THUS TO REDUCE THE PROBABILITY OF RECEIVING BIDS ON THE SCRAP STEEL IN EXCESS OF ESTABLISHED CEILING PRICES. THERE HAS BEEN CITED NO LEGAL AUTHORITY FOR SUCH A PROPOSITION AND I KNOW OF NONE. THE RULE HAS BEEN FREQUENTLY STATED AND LONG APPLIED THAT IN EXCHANGING OLD MATERIAL OR EQUIPMENT FOR NEW, CASH BIDS, ALSO, MUST BE SOLICITED AND THE AWARD MADE ON THE BASIS OF THE LOWEST NET COST TO THE GOVERNMENT. 26 COMP. DEC. 534; 3 COMP. GEN. 304; 5 ID. 798; 7 ID. 230; 15 ID. 811; 18 ID. 227; 19 ID. 313. THAT THE RULE IS A SALUTARY ONE IS HARDLY OPEN TO QUESTION AND THERE APPEARS NO REASON WHY IT SHOULD NOT APPLY TO TRANSACTIONS OF FEDERAL PRISON INDUSTRIES, INC., INVOLVING THE DISPOSITION OF SCRAP STEEL.

UNDER THE CIRCUMSTANCES THIS OFFICE MAY APPROVE USE OF THE SUGGESTED PROVISION ONLY IN THE EVENT CASH BIDS, ALSO, ARE SOLICITED AND THE AWARD MADE ON THE BASIS OF THE LOWEST NET COST TO THE GOVERNMENT, IN ACCORDANCE WITH THE USUAL PROCEDURE.